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Tuesday, February 25, 2014

This idea originally came from Jatin Khemani – an equity
analyst and my ex-student - he surely knows more about stocks than me. So this blog post is dedicated to Jatin.

The Noida Toll Bridge linking Delhi and Noida is run by listed
company called Noida Toll Bridge Company Limited. This company, as one can imagine, has a very
simple business model -it spends on maintaining the toll road and gets revenue from people who use the toll road. With increasing traffic in Delhi, their revenues are
growing and so is their profits.

In the past 6-7 years, their Earnings per share (EPS) has grown from Rs. 0.59 (in 2007) to Rs. 2.25
(in 2013) – a 25% CAGR. The company uses this profit to reduce it’s debts and
their debts has gone down from Rs. 323 crores (in 2006) to Rs. 23 crores (in
2013).

In the past three years –they have started giving dividends
to shareholders – they gave 5% dividend in 2011 and in 2012 and they doubled it to 10% in 2013. This
10% in 2013 meant that on an EPS of Rs 2.25 they gave Rs 1.0 as dividend per
share– a dividend payout of 44% (meaning that 44% of their profits was given back
to shareholders).

So in effect, the management is using the profits generated
to pay back some loans and also pay back some profits to the shareholders.As the loan amount is going down, the
dividend payment is going up – the dividend per share
has doubled from 5% to 10% in 2013.

In 2014, the current year, their revenues for the period
April to December has grown by 14% and net profit and the EPS for the same
period has grown by 25%. The company has already paid 10% dividend (Rs 1 per
share) and they still have money to pay more dividend as the loans are going
down now. They have last evening
announced that the board will meet on 28th Feb to consider paying
further dividend.

When the dividend payout was Rs 1 per year – the share value
was hovering around Rs 20- which meant
a dividend yield of around 5%. Now if the dividend payout goes up to Rs 1.5
or Rs 2 per share – at a share price of Rs 20, the dividend yield goes up to
7.5% or 10% (respectively). This makes
the share very valuable and will increase the share price to Rs 30 to Rs
40-so that the dividend yield comes back
to 5%.

This means that if you buy the share now (quoting at around
Rs 21-22) – you can make a decent appreciation in the next one month. The
following are the scenarios if you buy the share at Rs 22 now:

Scenario 1 – the board
decides that they will not pay any more dividend – then the share value
will not go up and will settle back around Rs 20 – you will lose 10% on
your investment of Rs 22 per share.

Scenario 2 – the board
decides to pay 5% dividend-then
the share value should go up to close to Rs 30 and you will make Rs 8 in
capital appreciation and Rs 0.5 in dividend - a profit of 38% in about a
month. This is a likely scenario as I see it.

Scenario 3 - the board
decides to pay 10% dividend-then
the share value should go up to Rs 35-40 and you will make Rs 13 in
capital appreciation and Rs 1 in dividend - a profit of 59% in about a
month. This is a very optimistic scenario and may not happen.

So I would recommend
that you invest in the stock as soon as possible andbuy it at Rs 22 or below – currently it is at
21.95.

Saturday, February 22, 2014

Among the old well known business families in Bangalore is the
Sipani’s. Back in the 80’s, they were known
for the car they manufactured called Dolphin - it was a Fibre glass body car (http://en.wikipedia.org/wiki/Sipani).
Dolphin did not do well and was eclipsed
by Maruti 800 as it came around the same time.

Over the years, the Sipani
brand has been in a few B2B businesses. Today most youngsters would not know the Sipani brand.

However in the past one year, the Sipani brand is starting
to be visible in the real estate market in Bangalore. They have come up with
5-6 projects - mostly in Koramangala - my information is that they are
delivering well on these projects.

The most attractive thing about this
launch is the pricing – it is currently being offered at 1800 per sq ft –I am
attaching the price list here (https://dl.dropboxusercontent.com/u/73601331/Bliss%20e-Price%20till%2027th%20Feb.pdf)
– You can get a 3 bedroom, 1416 sq ft flat for around 31- 32 lacs – That’s
the good news. The bad news is that, this price is going up by Rs 150 psft with the launch
which is planned for next Friday (27th).

So in case you are interested – please read further my views
and please take your call as soon as possible –
definitely by Thursday evening (27th).

So here are my views on the property:

The positives beyond the price:

Legally clean - It is
coming up in a land parcel that is owned by the Sipani family for more
than 15 years – so I do not think they would have any legal issues – HDFC,
ICICI and Axis have already approved it for home loans

Neighbouring developments –

The flat complex is
adjoining a staff hostel complex build by Sipani’s for Narayana Hrudayalaya.
I think there will be appx 500 employees (Doctors and Nurses) of the
Hospital staying there. This is good because more people means more
commercial activity and more development.

They are also going to
build a 100 bed hospital in the same neighbourhood (planned to complete
around the same 18 months) which will be managed by Narayana Hrudayalaya –
that is also good because there will be some commercial activity as well.

There is also a
commercial supermarket being planned by the Sipani’s adjoining this
property.

Size of property - The
property has only 285 flats –and has reasonable common amenities –a swimming
pool, a club house, a basketball court, amphitheatre and some greens.

Distance from main road - It
is just about 2 kms from the Hosur highway and the approach road is a
decent tar road (40 ft I think). There are three approach roads and we
drove in two of them and they are good enough.

It is appx 7-8 Kms from
Electronic city -I think the drive will be peaceful.

Price of flats in the area
– There are no flats there – but I think the going rate for something like
this would be Rs 2200 psft plus
right now.

Price of flat after 18
months – this is my forecast - I
believe the flat would be selling at around 3000 psft in 18 months time,
when the delivery will happen.

The negatives

The location - around the
area, there are green farms – in fact I saw a good grape vineyard pretty
close to the location. There are quite a few plotted layouts (land selling
at around 1400 psft ) – but there are hardly any people living there right
now. Is it bad? – may be – may be
not.

Rental - I would think you will get appx 7-10 K per
month for a three bedroom flat. That is 2-3% of the flat value which is
what you get anywhere-so that is
not a negative actually

Selling the flat - if you
want to invest now and exit when it is ready, it would need a bit more
work as the location is currently not developed.

So in case you are interested – please reach out to Abhinav
Daga of Sipani Properties at 99000 89306 and act fast. I believe it is a good deal

Disclaimers –
There are two of them:

I may or may not invest in
this. I do not need more real estate for myself – I have more
than my fair share –but I am recommending it to my readers.

I do not have any
brokerage or such incentives by recommending this – sometimes, readers think thatI am blogging for such gains. I want to
assure you my reader that there are no such motivations for me and my objective
of doing this is pure and simple –
to be able to help the readers of my blog – just the way someone helped me
many years back.

Tuesday, February 18, 2014

“I save Rs X per
month and where do I invest it – I am
looking for long term investment (2-3 years atleast) and I am looking for good
returns.”

There are no straight answers to this question - the answer
will
depend on the risk taking ability and life stage of the person investing. Plus as of now, there is the uncertainty of elections ahead and how does one recommend anything at all.

Having given the disclaimer above, here is my answer to this
question:

In case you have some money to invest and do not want to do
a Fixed Deposit type of investment that just mirrors inflation, then here is
one sector where you can put your money with a 2-3 year time frame:

Pharma sector – this sector has done well in the past few years
and is expected to do well in the
coming years. Sure, there are bad apples like Ranbaxy – but there are
great stories like Sun Pharma and Lupin too. The industry’s good
performance is mirrored by MF’s focussed on this sector. Look at Reliance Pharma Fund -http://www.moneycontrol.com/mutual-funds/nav/reliance-pharma-fund/MRC058–
this is the largest pharma fund in the country in terms of Assets under
management and has given great returns in the past 5 years(36% per annum compounded). Will it give
the same in the future? I believe that it will give at least 20% per annum
in the future and that I think is good enough (remember-this 20% is post tax if you hold the MF for more
than one year). I have invested in
this fund last year and also recently and I recommend it to you as well.
You can do an SIP if you want to invest your monthly savings – or you can
do a one time investment. I believe that you will get a 20% return per
annum at least.

In case you have some lump sum amount
that needs to be parked for a period not exceeding six months – then liquid
funds is the way to go. These funds have given 9% per annum in the past year
and I believe that there will be no lowering of interest rates till elections
are over – so they will give 9% plus currently.